A 14-strong business group including an oil giant, banks and investors yesterday called for Tony Blair to implement tougher caps on industry emissions of heat-trapping gases.

The group said that such a move would present opportunities both to British business, by fostering investment in low carbon technologies, and act as an example to developing countries such as China and India, whose booming economies are burning ever more fossil fuels.

A major tool to address climate change is the EU carbon market - its Emissions Trading Scheme - which controls the supply of pollution permits to heavy industry, forcing businesses either to clean up or buy extra permits.

"We want to work with the government and other companies across Europe towards strengthening this critically important piece of policy," says James Smith, chairman of Shell UK.

"We need EU Governments to set clear targets for the ETS out to 2025 so that our businesses and others can have the confidence to make long-term investments in reducing emissions."

The group, calling itself the Corporate Leaders Group on Climate Change (CLG), has set out its blueprint for the future in a letter to the Prime Minister.

In other measures to address climate change, its says the UK should stimulate emerging low-carbon technologies such as marine tidal and wave power generation, as well as encourage such investment in developing countries. The European Commission now has the chance to drive for deep emission cuts as member states propose by June 30 their draft quotas for the second round of the ETS from 2008-12.

In a highly criticised mismatch, firms in most countries - but not Britain - got more permits than they needed in 2005, the first year of the first phase of the scheme, raising the pressure now for states to tighten their carbon belts.